Mon., 8:14am: Energy company buys railroad

September 30, 2013

EAST LIVERPOOL - Another tentative agreement has been reached to sell the Columbiana County Port Authority's railroad, this time to a subsidiary of major player in the shale gas boom underway in the region.

The port authority agreed at Friday's special meeting to enter into a deal they hope will result in the sale of the railroad to Mule Sidetracks LLC for $3 million.

Port CEO Tracy Drake said Mule Sidetracks is a subsidiary of MarkWest Energy Partners, the company involved in construction of a $500 million natural gas storage, transportation and fractionization facility near Scio in Harrison County that is to receive gas from the $400 million collection and processing plant being built near Kensington.

"MarkWest has not yet said what they intend to do (with the railroad) but we believe it will facilitate their ability to do additional development in the region since they've already invested over a billion dollars in the state of Ohio. We would like to see some of that investment come our way," Drake said.

The 36-mile former Youngstown & Southern Railroad runs from Boardman through the Columbiana County communities of Columbiana, Rogers and Negley before ending near Darlington, Pa. Drake believes at the very least Mule Sidetracks will use the railroad to "deliver products for MarkWest and others that will come on board," but he can envision the line playing a role in something larger in the future.

"At this time they don't want to say anything else because it's a very competitive business," he said of MarkWest.

As part of the proposed deal, the board also approved an agreement with the Youngstown & Southern Railroad Co., which operates the railroad under an existing lease. Under the agreement, YSR would continue operating the railroad and pay the port authority $25 for every rail car of freight hauled on the line in excess of 1,000 carloads per year. The agreement ends in 2024 or when the YSR has paid the port authority $350,000, whichever comes first.

Drake said MarkWest is happy with this arrangement because it has no interest in operating a railroad. "That's not their forte," he said.

YSR uses the line primarily to haul waste to the construction and demolition debris landfill in Negley, which is operated by Tervita Corp.

MarkWest has 30 days to close on the deal, which is the same time frame needed for the sale to receive the approval of the U.S. Surface Transportation Board. "We don't expect any issues to jump up between now and the closing," Drake said.

This marks the latest attempt to sell the railroad to a viable operator since it was purchased in 2000 by the port authority, which did not want to see the line scrapped, believing it could still be an economic development asset.

The most recent effort occurred earlier this year, when a company by the name of Aqua Infrastructure entered into a non-binding letter of intent to purchase the railroad for $3 million. Aqua intended to use the railroad right-of-way to install waterlines to get water to oil and gas drilling sites in the area, but the June 30 deadline came and went without the company approving the sale.

Drake said Aqua will now have to deal with Mule Sidetracks if still interested in the railroad right-of-way.